Medicare Open Enrollment Ends Dec. 7—Should You Switch to a Medigap Plan?

With Medicare open enrollment ending Dec. 7, 2025, shifts in the Medicare Advantage market — fewer plans and reduced supplemental benefits — are prompting some beneficiaries to consider switching to Original Medicare plus a Medigap policy. Medigap offers predictable out-of-pocket coverage in exchange for higher monthly premiums (typical plans range roughly $32–$550/month) but often requires medical underwriting unless consumers qualify for guaranteed-issue windows created by carrier market exits or specific enrollment rules; switching also usually requires purchasing standalone Part D drug coverage. These dynamics may influence insurers’ risk pools and premium revenue mix, and create short-term guaranteed-issue demand where carriers withdraw from markets.

Analysis

Market structure: The current MA-to-Medigap window favors firms that sell standalone Part D, retail clinics, and consumer-distribution platforms. Winners: PBMs/retailers (CVS, CI) and online brokers (EHTH) that capture incremental Part D and Medigap sales; losers: MA-centric insurers (Humana, some regional carriers) that face enrollee churn and margin pressure if benefits are cut. Expect upward pressure on Medigap premiums because underwriting restricts supply, improving unit economics for disciplined Medigap writers over 6–24 months.

Risk assessment: Short-term (days–weeks) risk centers on Dec 7 enrollment flows and ANOC disclosures; medium-term (3–12 months) risks include state-level guaranteed-issue expansions or CMS policies (e.g., prior authorization in Original Medicare) that could blunt switching. Tail risks: a federal rule forcing expanded guaranteed-issue windows or broad MA network restorations would rapidly reverse flows; hidden dependency is insurer rate history—carriers with poor rate discipline face adverse selection and rapid margin collapse.

Trade implications: Tactical trades should be event-driven around enrollment and CMS weekly MA data. Favor long exposure to CVS (CVS) and EHTH (EHTH) for Part D/marketplace capture and hedge/short MA-heavy names like HUM with 3–9 month puts or small short equity positions. Rotate capital away from small-cap MA specialists into PBMs, brokers, and diversified insurers; size initial positions 1–3% of portfolio and scale on objective triggers (see decisions).

Contrarian angle: Consensus assumes a sustained exodus from MA; reality likely is a spike of guaranteed-issue conversions followed by stabilization because underwriting and higher Medigap premiums limit conversion volume. Historical parallels (past MA benefit retrenchments) show temporary enrollment swings but continued secular MA growth — so keep positions small, time-limited, and trigger-based to avoid mean-reversion losses.

Key Decisions for Investors

• Establish a 2–3% long position in CVS Health (CVS) with a 3–12 month horizon to capture incremental Part D volume and retail clinic utilization if >0.5% net monthly MA outflow is reported by CMS; add to 4–5% if outflows persist for two consecutive months.
• Initiate a 1–2% long position in eHealth (EHTH) or buy 9–12 month calls (1.0–1.5x delta exposure) to play increased consumer shopping for Medigap/Part D; increase position by 1% if ANOC filings show >10% of MA plans in top-20 counties trimming supplemental benefits.
• Take a 1–2% short (or buy a 6–9 month put spread) on Humana (HUM) as a hedge against MA enrollment erosion; if CMS monthly MA net enrollment falls >2% for two months or Humana announces market exits in >5 counties, increase to 3% short exposure.
• Reduce exposure to small-cap, MA-concentrated insurers (trim existing positions in Molina (MOH) / Centene (CNC) by 20–30%) and reallocate to PBMs/brokers if carrier-specific MA plan exits exceed 5 plans in top-50 counties by enrollment within 60 days.